By FRED O. WILLIAMS
News Business Reporter
6/20/2004
In a move that seems to defy logic, three New York City law firms are suing more than 3,000 suppliers nationwide, demanding the return of payments that Bethlehem made before it went bankrupt. The contested payments occurred in the 90 days before the steelmaker's Chapter 11 filing on Oct. 15, 2001.
The lawsuits invoke rules against "preferential" payments that can siphon cash from a faltering company. The rules are supposed to divide assets fairly and prevent a stampede of anxious creditors during a company's final days.
But indiscriminate lawsuits against suppliers have turned the preference rule into a cash machine for bankruptcy lawyers and a headache for companies, some critics said.
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Everything above the line is from the article - below the line is just my opinion.
Business Credit Insurance can't stop unscrupulous attorneys from filing unwarrantable lawsuits.
(I am not saying the attorneys involved here are unscrupulous.)
But, it appears they have sued everyone that received a payment within ninety days of the bankruptcy filing. If that is the case, in my opinion, many of the suits are unwarrantable and they are just throwing crap on the wall to see what will stick.
I am guessing that they know it will cost some of the people sued less money to settle than it will to appear in court to prove that the payment they received was made during the "normal course of business" (which would indicate it was not a preference payment). Also, I am guessing that every time someone settles, more money goes into the attorneys' pockets.
I guess it is easier and less expensive to sue everyone and force them to prove that it was not a preference payment than to try to determine which payments are in fact preference payments (so much for doing the right thing).
(I am also not saying that the attorneys involved are scrupulous.)
But, if you are required to pay back a legitimate preference payment, you will want to have Business Credit Insurance backing you up.
